This question was the topic of
a high-level meeting called to order by Nobel Prize economist Robert
Mundell in late June. These intimate gatherings of the world's leading
financial and economic thinkers was the 10th such meeting with the
first held in 1971, three weeks after President Nixon took the dollar
off of the gold standard.

Those debating the need for a world
currency reason that if the euro can replace the franc, mark and lira,
then why can't a new world currency merge the dollar, euro and yen.
They include former Federal Reserve Chairman Paul Volcker, former
Argentine Finance Minister Domingo Cavallo, currency-board guru Steve
Hanke from Johns Hopkins University, and former Israeli Central Bank
head, Dr. Jacob Frenkel.

In order to understand what this
means, let's take a quick look at history. In 1944 the world's finance
ministers met in New Hampshire at a hotel named Bretton Woods where
they hammered out a new monetary system for the world which would
include setting the value of gold at $35 oz. It also established two
new global banking institutions, the World Bank-WB and the International
Monetary Fund-IMF, both of which would ultimately work to create a
global financial and monetary system to facilitate world wide trade
through open borders, thus breaking down the financial and economic
barriers between nation-states. The organizations and agreements established
at that time were dubbed "the Bretton Woods" system. A third institution
dealing with world trade was proposed which Congress refused to ratify.
It was not until 1994 that a lame duck congress passed the General
Agreement on Trade and Tariffs which became the World Trade Organization,
thus harmonizing trade between countries.

In 1944, gold was the main stabilizer
of a country's economic well-being because the amount of gold would
keep inflation in check and it also was used to keep trade balances
between countries in check. If one country had an outstanding balance
of payments as a result of not enough exports to match its imports,
that imbalance could be wiped out by transferring gold between the
countries at a prize of $35.00 oz. If a country did not have enough
gold, then they needed to either increase exports or devalue their
currency. This wonderful system did not allow for currency devaluations
like what we saw in 1998 during the Asian Crisis and it did not allow
for the large build up of trade imbalances like the $100B which the
U.S. has with China. Furthermore, according to the Bretton Woods agreements,
fluctuations between currencies were confined to a plus or minus 1%
band.

When President Roosevelt outlawed
personal ownership of gold in 1933, he continued to honor all countries
that had in their vaults U.S. gold-backed dollars which were used
by countries to stabilize their own currencies, since they were convertible
into gold at any time. Not many countries converted their gold-backed
dollars into gold because the U.S. was the strongest country in the
world. However, it was Charles de Gaulle who saw that the U.S. was
spending far more than it had in gold reserves when he demanded $300M
be converted to gold in early 1965. While that request was honored,
it was not until Britain incurred the largest monthly trade deficit
in its history that the Bretton Woods fixed exchange rates broke down.
In August 1971, because the IMF would not lend Britain $300B to cover
their deficit, they came to the U.S. to ask that their gold-backed
dollars be converted. Since their request amounted to one third of
the amount the U.S. had in gold reserves, it was determined that we
could not honor this request.

Interestingly enough the same Paul
Volcker who wants a global currency was part of Nixon's cabinet serving
as Undersecretary of the Treasury for Monetary Affairs during this
historic time. He also is the same Paul Volcker who recently has been
instrumental in converting America's accounting system to a global
accounting system and he is the same Paul Volcker who has been working
with our government to change its system of personnel management.
Nixon took his entire Cabinet to Camp David where they determined
the course of world economic history. On August 15, 1971, Nixon announced
that had directed Treasury Secretary John Connally to "suspend temporarily
the convertibility of the dollar into gold or other reserve assets."

By taking the dollar off the gold
standard, Nixon opened Pandora's Box. Since the largest country in
the world had taken historic steps to completely sever their currency
from a tangible, it signaled a massive change in how the world would
trade with one another. For the first time since the cave man decided
that animal skins had value to the Middle Eastern trading routes which
used gold, silver, jewels, animals and fine clothing, the monetary
system was reduce to being backed by "air." Eventually all the currencies
of the world began to "float" against one another. Nixon's actions
were paramount to the de-regulation of global monetary affairs as
the gold standard was thrown out, creating the right conditions for
currency speculation.

As a result of not having a gold
standard, countries are at the mercy of stronger and bigger players-countries,
corporations and/or bankers, who, if they do not like a country's
polices because they do not favor what they want, can give them incentives
to change their mind. All they have to do is sell that country's currency
in large quantities. This worked very well during the Asian Crisis
to help Thailand, Malaysia, Korea and Japan make some changes so they
could come into "conformance" with World Trade Organization rules
and regulations on Financial Services. It can work anywhere.

Today we have calls for China to
float its currency. Does any of this sound familiar? Let us take a
look at the end-result of currency speculation. For over a decade
and specifically after 1994, American corporations have moved much
of their production from highly paid American workers to slave-labor
Chinese workers. As a result, their costs have come down and profits
have risen. In order for all of corporate America to stay competitive
with companies like Wal-Mart who use Chinese slave-labor to manufacture
all of its goods so that it can undersell the local family owned stores,
many other companies are in the process of moving to China in order
to stay in business. They include the makers of wood furniture, paper
products, metal parts and machine tools. Actually what is taking place
is a permanent revolution as more and more American's are displaced
by slave labor in China. How can we keep our standard of living? We
can't.

China, on the other hand, has seen
its exports triple from $122B to $365.4B as a result of corporate
America's outsourcing. Furthermore, the United Nations has estimated
that China's average wage is 20% of what is being paid to workers
in Malaysia and Taiwan and 10% of what is being paid to workers in
Singapore. Thus, many Asian countries have also been sending much
of their goods to China for completion-before being shipped to the
U.S. About 50% of China's exports come from multinational corporations.

With the $100B trade deficit that
now exists between the U.S. and China, China is a very large purchaser
of dollar denominated assets. Inflows of hot money into China have
been forcing the Chinese central bank to buy an average of $600M a
day in dollars to keep their currency steady against the dollar. Fed
Chairman Alan Greenspan is warning China to float its currency and
to de-link with the dollar while the White House is under pressure
from the U.S. business lobby who say Asian currency manipulation is
costing jobs. Really-or are they upset that they are being underbid
and the shoe is on their foot as a result of the devaluation of the
Chinese renminbi?

You see as the dollar drops, the
Chinese renminbi drops in value because they are linked, thus Chinese
manufactured slave labor exports are even cheaper today in Europe
and elsewhere, making their economic turn-around even more difficult.
Is this the end result of floating currencies? No. One day Americans
are ultimately going to have to pay the price when the lesser developed
countries tell us they are sick and tired of carrying our load of
debt. If it weren't for China and Hong Kong who have purchased $290B
in U.S. dollars and Treasury bills that acts as a "line of credit"
between our income and expenses, the dollar would be worthless.

I find it fascinating that the
global financial wizards led by Robert Mundell have not figured out
that gold is the best solution to trade imbalances and currency fluctuations
(also known as currency manipulations). Why go back to gold when a
global currency would allow for even more pillaging? Think of the
haggling there would be to determine what exchange rate a currency
would receive in order to be converted into the new global currency.
Think of the further "whipping into shape" the international bankers
would have over smaller countries rich in minerals such as gold, diamonds,
oil and copper, not to mention forests, game and agricultural lands.

Furthermore, a global currency
would signal two other serious changes: (1) the final loss of sovereignty
between the countries of the world and (2) the dollar would no longer
be the world reserve currency signaling its power and strength over
other currencies. By eliminating the dollar and its position as a
world reserve currency, it would break the hold of the financial power
of the U.S. While these wizards of finance are aiming for 2040 as
the year for the switch, I certainly hope their idea goes the way
of the Titanic.

Joan Veon is a freelance international reporter
and a businesswoman. She Is Executive Director of The Women's International
Media Group, Inc. Her website is www.womensgroup.org.
For an information packet, please call 301/371-0541

"Nixon took his entire Cabinet
to Camp David where they determined the course of world economic history.
On August 15, 1971, Nixon announced that had directed Treasury Secretary
John Connally to "suspend temporarily the convertibility of the dollar
into gold or other reserve assets."